Study on Mainstreaming Equity and Poverty

Reduction in Policies, Strategies and

Programmes in Kenya

JULY 2020

RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILLMENT OF THE

REQUIREMENTS FOR THE AWARD OF A DEGREE IN COMMUNITY
DEVELOPMENT AT GARISSA UNIVERSITY
 TABLE OF CONTENTS
FOREWORD................................................................................................................................................................i
LIST OF ABBREVIATIONS.......................................................................................................................ii
CHAPTER 1: INTRODUCTION...............................................................................................................1
A.
BACKGROUND.........................................................................................................................................1
B.
PRINCIPLES AND OBJECTIVES OF THE PRSP............................................................................2
CHAPTER 2: A REVIEW OF THE IMPLEMENTATION OF THE IPRSP....................5
A. INTRODUCTION.......................................................................................................................................5
B. IMPLEMENTATION OF IPRSP............................................................................................................5
C. IMPEDIMENTS TO IMPLEMENTATION......................................................................................10
D. IMPACT ON POVERTY REDUCTION............................................................................................10
CHAPTER 3: POVERTY DIMENSIONS..........................................................................................11
A. INTRODUCTION.....................................................................................................................................11
B. DEFINITION OF POVERTY................................................................................................................11
C. EXTENT AND MAGNITUDE OF POVERTY................................................................................12
D. NATURE AND CHARACTERISTICS..............................................................................................14
E. CAUSES OF POVERTY........................................................................................................................16
F. POVERTY REDUCTION STRATEGY AND TARGET...............................................................27
CHAPTER 4: MACRO ECONOMIC FRAMEWORK...............................................................29
A. INTRODUCTION.....................................................................................................................................29
B. OVERVIEW OF PAST ECONOMIC TRENDS..............................................................................29
C. MACROECONOMIC FRAMEWORK: THE FISCAL STRATEGY 2000/01-
2003/04...............................................................................................................................................................30
D.
PRO-POOR GROWTH POLICIES......................................................................................................32
E.
MACRO ECONOMIC POLICIES FOR 2001 TO 2004.................................................................32
CHAPTER 5: KEY NATIONAL ISSUES AND CHALLENGES........................................44
CHAPTER 6: SECTOR PRIORITIES..................................................................................................50
A. INTRODUCTION.....................................................................................................................................50
B. AGRICULTURE AND RURAL DEVELOPMENT........................................................................50
C. HUMAN RESOURCE DEVELOPMENT.........................................................................................55
D. PHYSICAL INFRASTRUCTURE.......................................................................................................58
E. TRADE, TOURISM AND INDUSTRY.............................................................................................62
F. PUBLIC SAFETY, LAW AND ORDER............................................................................................66
G. NATIONAL SECURITY........................................................................................................................69
H. PUBLIC ADMINISTRATION..............................................................................................................69
I. INFORMATION TECHNOLOGY......................................................................................................73
CHAPTER 7: MONITORING AND EVALUATION OF POVERTY EDUCTION........76
A. INTRODUCTION.....................................................................................................................................76
B. STRATEGY AND APPROACH TO M&E.......................................................................................76
C. INSTITUTIONAL FRAMEWORK OF THE M&E PROCESS...................................................77
D. MONITORING INDICATORS............................................................................................................77
E. CO-ORDINATION OF M&E................................................................................................................78
F. FINANCING OF M&E............................................................................................................................78
G. CHALLENGES IN IMPLEMENTING THE PRSP.........................................................................78
PRSP IMPLEMENTATION MATRIX................................................................................................65

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 DECLARATION.
DECLARATION BY THE STUDENT
I declare this is my original work and has not been presented for examination
anybody else.

Name…………………………………………Date ……………………………

ADM NO………………………………………………………………….

DECLARATION BY THE SUPERVISOR.

This project has been submitted for examination with my approval as a supervisor.

Name …………………………………………… Date ………………………….

 DEDICATION
I would like to dedicate this project to my family whose assistance has been
invaluable to my undertaking of the Degree in community development
 ACKNOWLEDGEMENT
I would like to extend my heartfelt gratitude to my family members especially my
mum, brothers Darod and Siyat for support financially and encouragement they
given me and to my two sons for giving me hope and that human is unlimited.
Thanks to my fellow classmates for their invaluable support too.
FOREWORD

This Poverty Reduction Strategy (PRS) outlines priorities and measures necessary for poverty
reduction and economic growth. It is a product of broad-based consultations undertaken in 70
districts of the country. The consultations included Sector Working Groups, Thematic Groups,
public hearings and National Consultative Forums. The PRS is also informed by in-depth
Participatory Poverty Assessment (PPA) studies undertaken in 10 districts. This PRSP therefore
presents the views and aspirations of all Kenyans.

The PRSP has the twin objectives of poverty reduction and economic growth. It identifies
measures geared towards improved economic performance and priority actions that will be
implemented to reduce the incidence of poverty among Kenyans. Specific economic policies
aimed at promoting a robust economy are outlined in a three-year macro-economic framework.
Specific measures to reduce poverty are identified and set out in the implementation matrix
which shows costing of each indicated policy measure, the implementing agencies, a specified
time frame and indicators for monitoring expected outcomes.

This PRS is therefore central to the development of a pro-poor and pro-growth Medium Term
Expenditure Framework (MTEF) budget. The three-year rolling MTEF budget will implement
the priorities by shifting additional resources towards pro-poor activities and programmes and
thus improve the quality of expenditure. An effective monitoring and evaluation system will be
put in place to assess the commitment and compliance to the plan and measure the effects of
policies. This will inform all Kenyans, on a timely basis, on progress made in implementing the
identified measures, policies and programmes.

It is through partnership initiatives between government, civil society, the private sector,
religious organizations, women, youth, people with disabilities, and the poor that we have been
able to develop this PRS. Similarly it is through collaborative efforts of all stakeholders that our
goals of poverty reduction and economic growth will be achieved. Volume I and volume II of the
PRSP are being released together with this year’s budget speech. Volume III will be released
later and it will contain the government’s vision, reaction and key actions.

It is also expected that there will be a volume IV, V, and VI which will contain the reaction and
response of the NGOs, private sector and development partners respectively. I therefore invite all
Kenyans to play their part, both at the individual and collective levels, to ensure the success of
this Poverty Reduction Strategy.

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 LIST OF ABBREVIATIONS
AIDS - Acquired Immune-Deficiency Syndrome
AGOA - African Growth and Opportunity Act
AMREF - African Medical Research Foundation
ASAL - Arid and Semi-Arid Lands
C&AG - Controller & Auditor General
CBK - Central Bank of Kenya
CBK - Coffee Board of Kenya
CBOs - Community Based Organizations
CBS - Central Bureau of Statistics
CCA - Common Country Assessment
COMESA - Common Market for Eastern & Southern Africa
CTB - Central Tender Board
DCFs - District Consultative Forums
DRCs - District Roads Committees
DSO - District Statistical Officer
EAC - East African Community
ECED - Early Childhood Education and Development
EGG - Economic Governance Group
FSP - Fiscal Strategy Paper
GDP - Gross Domestic Product
GII - Global Information Infrastructure
HIV - Human Immune-deficiency Virus
ICDC - Industrial & Commercial Development Corporation
ICI - Inter-Ministerial Committee on Industrialization
IDGs - International Development Goals
IGADD - Inter-Governmental Authority on Drought and Development
ILO - International Labour Organization
I/O - Input/output
IPC - Investment Promotion Centre
IPR - Intellectual Property Rights
I-PRSP - Interim Poverty Reduction Strategy Paper
IT - Information Technology
JICCC - Joint Industrial and Commercial Consultative Committee
JKIA - Jomo Kenyatta International Airport
KACA - Kenya Anti-Corruption Authority
KCB - Kenya Commercial Bank
KEB - Kenya Education Board
KENGEN - Kenya Electricity Generating Company Limited
KIE - Kenya Industrial Estates
KIPPRA - Kenya Institute for Public Policy Research & Analysis
KIRDI - Kenya Industrial Research & Development Institute
KPLC - Kenya Power and Lighting Company
KRA - Kenya Revenue Authority
KRB - Kenya Roads Board
KRDS - Kenya Rural Development Strategy
KTB - Kenya Tourist Board

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KTDC - Kenya Tourist Development Corporation
LAOB - Local Authority Oversight Board
LATF - Local Authority Transfer Fund
M&E - Monitoring and Evaluation
MCH - Maternal and Child Health
MICS - Multiple Indicator Cluster Survey
MTEF - Medium Term Expenditure Framework
MTS - Multi-Lateral Trading System
NACC - National Aids Control Council
NASSEP - National Sample Survey and Evaluation Programme
NCF - National Consultative Forum
NGOs - Non-Governmental Organizations
NIC - Newly Industrialized Country
NII - National Information Infrastructure
NPEP - National Poverty Eradication Plan
NSC - National Steering Committee
NSSF - National Social Security Fund
PAMFORK - Participatory Methodologies Forum in Kenya
PEC - Poverty Eradication Commission
PPAs - Participatory Poverty Assessments
PRS - Poverty Reduction Strategy
PWDs - People with Disabilities
SACCOs - Savings and Credit Co-operative Organizations
SAGA - Semi-Autonomous Government Agency
SAM - Social Accounting Matrix
SBP - Single Business Permit
SME - Small and Medium Enterprises
STIs - Sexually Transmitted Infections
SWGs - Sector Working Groups
UN - United Nations
UNDP - United Nations Development Programme
USA - United States of America
VAT - Value Added Tax
WMS - Welfare Monitoring Survey
WTO - World Trade Organization
WWW - World Wide Web

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 EXECUTIVE SUMMARY

The consultation process to all the districts the involvement of the civil society

Private sector and all other stakeholders

The prioritization process and activities for each of the sectors

Highlights of all the cross cutting issues

Poverty reducing strategies proposed

The cooperation required by all stakeholders

The need for participative monitoring and evaluation

The charter for social integration

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 CHAPTER 1: INTRODUCTION

A. BACKGROUND

1. The challenge facing Kenya today is to reduce poverty and achieve sustained economic
growth for healthy national development. The Government is committed to address this challenge
in consultation with key stakeholders in the economy, especially the private sector, civil society
organizations and other development partners. The strategy to achieve this entails the
participation and inclusion of all Kenyans, especially the poor, in the design and implementation
of strategies aimed at tackling the challenges of poverty. This is in recognition of the fact that it is
the poor who understand at first hand the causes, nature and extent of poverty.

2. This Poverty Reduction Strategy (PRS) outlines the priorities and measures necessary for
poverty reduction and economic growth. It is a product of broad-based and in-depth consultations
among all key stakeholders, in particular the poor, at all levels. These comprehensive
consultations have ensured that the PRS fosters national ownership that is necessary to support
and implement poverty reduction and economic growth initiatives. The PRS builds on past efforts
aimed at poverty alleviation and in particular the Interim Poverty Reduction Strategy (IPRS)
which identified interim measures and strategies necessary for facilitating sustainable and rapid
economic growth, improving governance; raising income opportunities of the poor; improving the
quality of life; and improving equity and participation. These principles remain valid and relevant
and form the basis of the PRS.

3. The PRS has the twin objectives of economic growth and poverty reduction. This is in
recognition that economic growth is not a sufficient condition to ensure poverty reduction. In this
regard, measures geared towards improved economic performance and priority actions that must
be implemented to reduce the incidence of poverty among Kenyans have been identified. The
paper identifies strategies that integrate sectoral objectives and ensure that priority actions are
consistent with the goals of spurring growth and reducing poverty. Economic policies and
strategies earmarked for implementation under the PRS outline a three-year macro-economic
framework aimed at promoting robust economic growth and poverty reduction.

4. This PRS is central to the development of a pro-poor and pro-growth Medium Term
Expenditure Framework (MTEF) budget. The three years MTEF will implement the priorities
aimed at improving the quality of expenditure and the shifting of resources towards pro-poor
activities and programs. The monitoring and evaluation component of the PRS will seek to ensure
effectiveness and efficiency in the allocation of economic resources to pro-poor development
initiatives.

5. The PRS is at the centre of the long-term vision outlined in the National Poverty
Eradication Plan (NPEP). The NPE proposes a fifteen (15) year time horizon to fight poverty and
has adopted the International Development Goals (IDGs), which aim at reducing global poverty
by half. The IDGs provide the vision for this country to eradicate poverty. The PRS on the other
hand is a short-term strategy, which seeks to implement the NPEP in a series of three year rolling
plans. As such it is an instrument to implement key national development policies such as the
NPEP; the National Development Plan and other key development strategies and plans. In
between the

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PRS and NPEP is the National Development Plan, which stipulates policies of a broader nature to
be implemented over the medium term.

B. PRINCIPLES AND OBJECTIVES OF THE PRS

6. The Poverty Reduction Strategy outlined in this content is an inclusive participatory

approach to planning whose primary aim is to put in place a people centred set of policies and
priorities to achieve growth and reduce poverty. This planning approach is guided by a set of
general principles and key objectives.

(i) Principles of the PRSP

7. Giving a Voice to the Poor: By taking into account the voices of poor people in a
consultative manner, the PRS has strengthened and given credibility to poverty reduction efforts.
Poverty is not only to be hungry and malnourished, to lack adequate shelter and housing, and to
be illiterate, but also to be exposed to ill treatment and to be powerless in influencing key
decisions affecting lives. Poor people lack voice, power and representation and this makes them
more vulnerable to ill health, illiteracy, unemployment, disasters or violence. This PRS process
corrects these anomalies by empowering communities to identify their basic needs and rights,
which are essential for ensuring sustainable livelihoods. The delivery of basic rights is therefore
an obligation, not only for government, but also for all those partners and collaborators who have
gone through the process with the government.

8. Participation and Ownership: The development of the poverty reduction strategy has
been country driven through a participatory process involving the poor and marginalized, key
stakeholders in the economy such as the private sector and civil society and religious
organizations. The Government has played the instrumental role of a facilitator and enabler
throughout the process. The process has been all-inclusive and tolerant of alternative views. In
this way, PRS guarantees ownership of the development process, and consensus that is crucial for
implementation and monitoring of poverty reduction measures.

9. Transparency, Openness and Accountability: The development of a viable poverty

reduction strategy cannot succeed unless the principles of transparency, openness and
accountability are embodied into the framework. By ensuring open and free access to information
and decision making processes by all actors in the PRS process, the Government has set the stage
for enhanced transparency and accountability in all aspects of national planning and prioritization
of development initiatives.

10. Equitable Distribution of National Resources and Development Initiatives: Equity is

central to the poverty reduction initiatives in this PRS, which will be made possible by allocating
resources to priorities identified by the people. This PRS therefore aims at enhancing equitable
distribution of national resources and development initiatives as proposed through the PRSP
consultation process.

(ii) Objectives of the PRS

11. Linking Policy, Planning and Budgeting: The principal objective of the PRS is to link
and harmonize policy, planning and budgeting. This link ensures that implementation takes into
account resource availability and constraints and expected

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Outcomes. The Medium Term Expenditure Framework provides this link by providing budgetary
allocations to specific measures set out in the PRSP. It is expected that priority will be given to
measures aimed at reducing poverty levels in the country.

12. Identifying National Development Objectives and Priorities: A key objective of the
PRSP is to identify and define the development objectives and priorities necessary for healthy
economic growth and poverty reduction through the various consultative processes and
mechanisms, such as the District Consultative Forums, Thematic Working Groups and Sector
Working Groups

13. Quality Expenditures Leading to Efficiency Gains: Quality expenditure is one of the
pillars of the PRSP and the MTEF process. The PRSP/MTEF seeks to ensure quality expenditure
through proper planning, setting of clear targets, prioritization of development initiatives, ranking
and costing of activities, which are all necessary conditions for quality expenditures.

14. Harmonization of The Financing Framework: The PRSP and MTEF budgeting
processes are designed to ensure harmonized financing of growth and poverty reduction efforts
that are a key factor for sustained fiscal discipline. One of the strengths of the PRSP process is
that it is consultative and leads to a clear set of goals, objectives and priorities, which directly
address the needs of the poor. It therefore accords the Government and all other development
partners the chance to harmonize their efforts towards the fight against poverty as it leads to
minimizing duplication of efforts and resources.

15. Monitoring and Evaluation: The success of the PRSP will depend on how well the
activities are funded, implemented, monitored and evaluated through a feedback mechanism. For
this to take place, there has to be in-built mechanisms that ensure continuous participation of key
stakeholders, communities and the poor in monitoring and evaluation of goals, objectives, inputs,
outputs and outcomes. This feedback informs the next round of PRSP/MTEF resource allocation,
hence ensuring efficiency in the way development resources are deployed both for economic
growth and poverty reduction.

(iii) Approach to the Consultations

16. The PRSP is a product of broad-based and inclusive consultation that took place at
national, regional, district and divisional levels in the country. The countrywide consultative
process was launched in October 2000 at a National Stakeholders Forum held in Nairobi. It
included all stakeholder categories with special attention to civil society, vulnerable groups
(women, youth, pastoralist groups and people with disabilities) and the private sector.

17. To ensure inclusiveness and broad-based participation, the consultations were organized
within a national framework consisting of: Divisional Consultations, District Consultative
Forums; Provincial Workshops; National Consultative and Stakeholders Forums; Thematic
Groups and Sector Working Groups.

18. The process received continuous policy guidance from a National Steering Committee
comprising of Chairpersons of the various Sector Working Groups, Permanent Secretaries,
selected NGOs, and Civil Society and private sector representatives. The entire PRS Consultative
and Strategy development process was coordinated by a

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Technical Secretariat comprising of professionals from the government, civil society, private
sector and technical advisors from the donor community.

19. In addition, Participatory Poverty Assessments (PPA) were conducted in 10 districts to

document the voices of the poor with regard to participation, inclusion and ownership of
development programmers and projects and in prioritizing activities that directly affect their well-
being. The PPA process involved listening to street children, persons with disabilities, pastoral
communities, unemployed youths, farmers, traders, jua kali artisans, the private sector, fishing
communities, urban slum dwellers, coastal communities, women, local leaders, professionals,
local administration and Government Ministries.

20. Upon completion, the first draft of the strategy paper was circulated to a wide cross-
section of stakeholders, subject matter specialists, and Government Ministries for comments and
feedback. The draft paper was further subjected to public review and scrutiny by a National
Stakeholders Forum.

(iv) Outline of the Report

21. This paper is presented in two volumes. Volume I contains the substantive components of
the PRSP while Volume II comprises annexes. Chapter 2 of Volume I presents a review of the
implementation of IPRSP focusing on progress achieved, bottlenecks encountered, and analysis
of whether set targets were met. Chapter 3 discusses poverty dimensions covering the definitions,
magnitude, characteristics and causes. The Chapter also presents the poverty reduction strategies
and targets to be achieved over the next three years. Chapter 4 sets out the macroeconomic
framework and its implication to the poverty reduction measures. Chapter 5 details national
priorities and issues as derived from (a) district consultations, (b) sectoral consultations,
(c) Thematic groups and (d) participatory poverty assessments.

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 CHAPTER 2: A REVIEW OF THE IMPLEMENTATION OF THE IPRSP

A. INTRODUCTION

22. In view of the poor performance of the economy and increasing levels of poverty, the
Government adopted the Interim Poverty Reduction Strategy (IPRS) in June 2000. The IPRS
outlined measures aimed at revamping economic growth and poverty reduction by focusing on
(i) facilitating sustained and rapid economic growth;
(ii) improving governance and security;
(iii) increasing the ability of the poor to raise their income levels;
(iv) improving the quality of life of the poor;
(v) Improving equity and participation.

23. Specific measures were put in place to monitor progress and implementation of the
IPRSP. These included macroeconomic management, sectoral and governance measures, and
consultations to develop a full PRS through a participatory process. In each of these areas, targets
were set and indicators identified to assist in the monitoring and evaluation of progress.

24. In the subsequent sections, a review of the implementation of the IPRSP is presented,
paying special attention to

(i) Progress made in the implementation of the strategies identified,

(ii) (ii) impediments that hindered the achievement of targets set
(iii) (iii) Brief assessment of any impact on poverty reduction and growth.

B. IMPLEMENTATION OF IPRSP

(i) Macroeconomic Management

25. In the area of macroeconomic management, the Government committed itself to the
reduction of the budget deficit, domestic debt, interest rates, and maintaining a stable and low
inflation regime. Significant progress was made in all these areas but challenges were also
encountered. The debt stock to GDP ratio stood at 49.5 per cent as at the end of December 2000,
against the set target of 53 per cent. During the 1999/2000 financial year, KShs.3.472 billion of
legitimate and verified pending bills were settled through Treasury Bonds. The budget deficit was
kept within manageable levels to reduce pressure on domestic interest rates and the money supply
growth kept within target levels to ensure price stability. The level of interest was maintained at
stable and relatively low levels compared to the previous year. Attainment of our macroeconomic
objectives remained elusive. Preliminary results indicate that the economy grew by less than 1 per
cent compared to a target of 2.6 per cent. A number of factors contributed to this, such as the
severe drought, the withholding of donor support, and the subsequent unsustainable fiscal
position.

(ii) Sector Policies

26. The implementation matrix of the IPRSP clearly outlined sector objectives, strategies,
monitoring indicators, costing, implementing agencies and time frame. The matrix contained
measures that aimed at reviving growth and contributing to poverty reduction.

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a) Agriculture and Rural Development

27. In agriculture and rural development, the government committed itself to reforms and
increasing resource allocation to improve the performance of the sector. Budget provision for
water supply was increased to support expanded supply of water and rehabilitation of water
projects. The pace of institutional reforms in the rural sector, which aimed at giving ownership
and control to stakeholders, was accelerated. First, Cabinet approved a draft policy on the coffee
sub-sector reforms aimed at privatization of marketing services performed by Coffee Board of
Kenya (CBK) while CBK retained the regulatory function. This was after consultation with
stakeholders. Second, liberalization of the tea sub-sector has been completed. Kenya Tea
Development Authority has been transformed to Kenya Tea Development Agency Limited
through amendment of necessary legal provisions. The new institution has been incorporated
under the Companies Act as an independent and private enterprise owned by small-scale farmers
st
through respective tea factory companies effective 1 July, 2000. Third, consultations with
stakeholders on both the Sugar Policy and Bill were completed in June 2000. The Sugar Policy
has been finalized and submitted to the Cabinet.

28. Fourth, the IPRSP set out to implement and enforce environmental plans, institutionalize
environmental impact assessment, pollution and waste management, reduction of loss of
biodiversity and control of water hyacinth and other invasive weeds in Kenyan lakes. The
Government enacted the Environmental Bill and the National Environmental Management
Agency Act has been put in place and will involve poor communities in environmental
restoration programmes. Fifth, the fisheries policy and legal frameworks were finalized while
work on the policy review of other commodities including cotton, horticulture, forestry,
pyrethrum, irrigation, dairy, animal health and beef continues. The control of water hyacinth was
also completed during the first year of IPRSP. The sector also undertook preparation of the
Kenya Rural Development Strategy (KRDS) to provide a common/shared vision and framework
for rural development.

29. In spite of the progress made in this sector, problems continued to be experienced in a
number of sub-sectors. The drought adversely affected water and energy supplies. Other
problems were related to governance issues; primarily the poor management of agricultural co-
operatives and agro-based industries like sugar, rice, tea, dairy products, coffee and lack of, or
poor access to, cheap credit to farmers as well as lack of proper extension services.

b) Trade, Tourism and Industry

30. In the Trade, Tourism and Industry sector, the government set out to reduce control and
licensing requirements, expand tourism and export markets, and to improve financial service
delivery among other things. The harmonization of tariffs was undertaken by eliminating all
suspended duties. A Joint Public/Private Sector Task Force was established while joint trade
missions to promote Kenyan product and secure market access were conducted successfully.

31. A Micro Finance Unit has been established at the Central Bank of Kenya (CBK). The
Unit has met with the Micro Finance Association whose membership comprises micro finance
institutions in the country. As a result, a draft Bill has been prepared and forwarded to the
Minister for Finance and the Attorney General for consideration. The Bill covers, among other
things, the approach to regulatory environment. The Act will

6
Specify three different tiers of micro finance institutions, the regulatory and supervision regimes.

32. As Communication is a key component for enhancement of trade, tourism and industry
there are now additional direct international flights to Mombasa and Eldoret as well as chartered
flights to Kisumu and Malindi. The process of revitalizing growth sectors has also been initiated,
the tourism police unit has been established and sections of the Local Government Act have been
reviewed leading to the establishment of a Single Business Permit (SBP).

33. The greatest challenges for the sector remain those of poor infrastructure, insecurity and
poor access to financial services required by investors. There has been also poor inflow of foreign
direct investment into the sector.

c) Public Sector Reforms

34. Public sector reforms especially the ministerial rationalization, reduction of the size of
government, and restricting ministries to their core functions were completed. The reforms
focused on the broad issue of improving public sector management. Several actions were
implemented and 22,190 civil servants were retrenched in the first phase. Additional staff
retrenchments were effected in the Kenya Revenue Authority (KRA), public universities and
other parastatal bodies. Some progress has been made in improving the terms and conditions of
civil servants within an affordable wage bill. Parts of the Harmonization Commission
recommendations for improving remuneration of public servants were effected. Progress has been
achieved in establishing a code of conduct for public servants and judicial officers. A public
service code of conduct was published in June 2000 and is being revised to secure further
improvements. A committee appointed by the Judicial Service Commission has looked into the
code of ethics for judicial officers and submitted their recommendations to the Chief Justice in
February 2001. Decentralization of some key functions, some to district level, is on-going.

35. A number of targets, such as the implementation of highflier scheme, approval of

benchmarks for result oriented performance, and systematic conducting of examination as the
basis of recruitment and promotion were not met. This was primarily because of the slowdown in
the implementation of the reform programme related to public sector restructuring and delayed
implementation of phase two of the retrenchment programme. Bad publicity due to a
misconception of the retrenchment programme, low levels of compensation benefits and slow
disbursement of compensation benefits also continued to bog down the process.

d) Privatization of Parastatals

36. In privatization, the Cabinet approved an updated privatization strategy in June 2000. A
number of studies have been completed and progress has been made in the privatization of Kenya
Commercial Bank (KCB), Telkom and Kenya Railways. Significant progress was made in
implementing the concessioning of the container terminal and other non-core services of the Port.
Work on separation of assets of Kenya Power and Lighting Company (KPLC) and Kenya
Electricity Generating Company Limited (KENGEN) has been completed. A Cabinet paper on
the privatization of Kenya Pipeline has already been prepared.

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37. The privatization of Telkom and commercialization of postal services were not completed
because of delays in the approval by the Cabinet and problems related to procedural guidelines of
completing the process. In general, these procedural guidelines also hampered the completion of
other privatization plans for a number of parastatals.

e) Human Resources Development

38. The IPRSP outlined several measures to improve education, health, HIV/AIDS and labor.
Most of the indicators can only be assessed after undertaking surveys. In the education sector, the
primary and secondary schools curriculum have been reviewed to reduce the number of
examinable subjects and the costs to parents. To ensure equity, the Equality Bill has been
published and the Affirmative Action Bill approved by Cabinet. The Rights of the Child Bill has
been approved by Cabinet and is awaiting publication. Cabinet has also approved the Family
Protection Bill. To improve statistics about the child, a Multiple Indicator Cluster Survey (MICS)
and Child Labour Module of the Integrated Labour Force Survey of 1988/99 have been
completed and both have generated up-to-date information on child labour and other social
statistics. In the health sub-sector, the Ministry of Health put in place the Health Sector Policy
Framework that outlines in detail specific measures for implementation.

39. The National Aids Control Council has been established to strengthen capacity and co-
ordination in responding to HIV/AIDS pandemic at all levels. Aids Control Committees have
been established in all ministries, provinces and constituencies. Failure to sign the World Bank
credit of US$50 million on time delayed the start of recruitment of professional staff as well as
the start of the major operations of the Council and activities at the district level.

f) Local Government

40. One of the main objectives of the IPRSP was to improve economic governance and
service delivery in local government. Specific strategies were to operationalize the Local
Authority Transfer Fund (LATF), improve financial management and revenue mobilization,
strengthen participatory planning, and establish financial management control board and
rationalization of Local Authorities legal and management framework.

41. The LATF was operationalized and transfers were made. The Local Authority Oversight
Board (LAOB) was established although operationalization encountered some difficulties at the
implementation stage. Private sector led oversight board has been appointed to assist streamline
City of Nairobi operations. Efforts to continue the Local Authorities reform are being continued
in the current PRSP.

g) Public Safety, Law and Order

42. The Public Safety, Law and Order sector set out to achieve predictable and impartial
justice system and to mainstream gender in development. Some progress was achieved in the area
of strengthening the independence of the judiciary. Computerization of the critical legal registers,
court recording, and financial management systems is in progress. A number of bills were drafted
and are awaiting presentation and approval by Parliament. Several targets have not, however,
been met e.g. approval of the National Gender Policy and increasing to at least 30 per cent
women in decision-making process.
h) Governance Measures

43. The Anti-Corruption Bill was published and discussed by Parliament. The budgetary
allocations to the Judiciary have been enhanced to accommodate commercial
Courts and increase the number of judges. Measures have been taken to increase the
independence of the Controller and Auditor-General (C&AG) office. The office has been
allocated increased budgetary resources. A draft of the proposed Kenya National Audit Office
Act has been prepared. Cabinet approved updated comprehensive procurement regulations for
implementation in all public institutions in June 2000. The Government has published a legal
notice that redefines the procurement procedures and guidelines. The notice decentralizes the
tendering procedures giving more powers and responsibilities to the accounting officers and
removing the powers of the District Commissioners.

44. In the area of strengthening budget, financial management and ensuring transparency, the
posts of Finance Officers were created and filled, and action has been taken to develop an
Integrated Financial Management System. Procedures for disbursement, management, and
monitoring of LATF has been put place.

45. A major setback in the fight against corruption was the decision by the High Court that
the setup of KACA was illegal, the rejection in Parliament of the Economic and Crimes Bill and
the Code of Ethics for Civil Servants. These drawbacks affected the pace of progress in dealing
with cases of corruption.

(iii) Participatory Plan

46. The Government committed itself to the preparation of a full PRSP through a
participatory process. The plan set out to establish a national consultative structure, conduct local
level consultations, and conduct district level consultation, provincial workshops, and national
level. All these commitments have successfully been completed as outlined in the methodology in
developing this PRS (see Annex 1). In addition, efforts have been made to hold parliamentary
consultations. Similarly, a Monitoring and Evaluation (M&E) team comprising of Ministry of
Finance and Planning and other various stakeholders including Poverty Eradication Commission
will be responsible for monitoring and evaluation and similar Sub-Committees will be established
in line Ministries. A thematic group on M&E has also been put in place to co-ordinate M&E
activities with the participation of all stakeholders.

(iv) Data for Monitoring Poverty and Growth

47. With regard to data for poverty monitoring and evaluation, the Central Bureau of
Statistics achieved several things it set out to do. Jointly with K-Rep, CBS conducted a survey on
small and medium enterprises with useful benchmarks on the sector. The Bureau also produced
the basic reports of the 1999 population and housing census and these were released in January
2001. A preliminary report of the Multiple Indicator Cluster Survey (MICS) has been completed
and its results incorporated in the Common Country Assessment (CCA) of the UN system. The
detailed analysis of the database has been initiated and will be completed within the first half of
the 2001/2002 fiscal year. The third Participatory Poverty Assessments were undertaken and have
been integrated into this PRS. The second volume of Poverty Report of the 1997 Welfare
Monitoring Survey (WMS) was released and the analysis of the basic report and agriculture
module are underway. An update of the poverty level is planned through a fourth WMS within

9
The life of this PRSP. Efforts to generate gender disaggregated data and to conduct a census of
people with disability will form part of this PRSP. Initiatives and progress has been made towards
the revival of the CBS/Donor Consultative Committee through a programme of monitoring and
evaluation, which will be coordinated by CBS. A study to restructure CBS to become a Semi-
Autonomous Government Agency (SAGA) was commissioned and is progressing well.

48. The main challenge that faced the implementation of data needs for monitoring and
evaluating poverty has come from inadequate financial resources to undertake a number of
activities that were identified. There were also the institutional constraints and bottlenecks in
CBS that made it difficult to execute the agreed set of actions.

C. IMPEDIMENTS TO IMPLEMENTATION

49. In addition to the specific bottlenecks outlined above for each of the sectors, the country
experienced a number of unexpected challenges that slowed down the pace of implementation of
strategies outlined in IPRSP.

50. Some of these challenges include:-

i. The severe drought adversely affected electricity and water supplies which negatively
impacted on all sectors of the economy;
ii. The delays in disbursement of donor funds affected the implementation progress of
donor funded projects and programs;
iii. Due to the reduction of the overall resource envelope associated with (i) above, the
government was forced to cut down its expenditures by about 50 per cent;
iv. There was also the slow disbursement of government funds to priority activities due
to the effect of the introduction of new financial accounting leading to significant
difficulties in the implementation of priorities.
v. The combined problems of (ii) and (iii) led to incomplete and delayed implementation
hence failure to meet the targets set in the IPRSP.

51. Consequently, it was not possible to implement all measures in a timely manner and as a
result some targets were not realized.

D. IMPACT ON POVERTY REDUCTION

52. The preliminary assessment of the first year of the implementation of the IPRSP point to
the fact that the growth enhancement objectives were not met while the outcome of poverty
reduction efforts has been less than satisfactory. However, one year is an extremely short period
to assess the full achievements of growth and poverty reduction initiatives. This is further
complicated by the difficulties experienced at the implementation stage. The correct assessment
of the impact of policy strategies requires careful documentation of the progress made through
monitoring and evaluation. It would also entail conducting surveys to generate data for making
inference on the direction of progress.

53. All these measurement approaches require resources and the institutionalization of the
principles of M&E. The strategies in this PRSP emphasize the establishment of stakeholder
monitoring and Evaluation Committee, and provision of resources to closely monitor progress of
implementation and impact assessment.

10
 CHAPTER 3: POVERTY DIMENSIONS

A. INTRODUCTION

54. Poverty remains a pervasive national problem presenting formidable challenges that call
for urgent action. The poor constitute more than half the population of Kenya - at least one in
every two Kenyans is poor.

B. DEFINITION OF POVERTY

55. Poverty is multi-dimensional. It includes inadequacy of income and deprivation of basic

needs and rights, and lack of access to productive assets as well as to social infrastructure and
markets.

56. The quantitative approach of measuring poverty defines the poor as those who cannot
afford basic food and non-food items. In 1997 the absolute poverty line was estimated at
KShs.1,239 per person per month and KShs.2,648 respectively for rural and urban areas
according to the Welfare Monitoring Survey 1997.

People’s Perception of Poverty

In Kajiado, the youth described poverty as ”lack of income, unemployment and lack of vision which
can be summarized as something next to death”. Women on the other hand described poverty as “lack
of livestock, inability to provide basic needs, lack of water, lack of land, having no source of income
and being childless”; while the men described poverty as “having nothing, inadequate livestock, lack
of grazing land, childlessness, inadequate water, unemployment and a poor economy.” One man in
Kajiado District, Eroret village was quoted saying that “poverty is when children cry and you cannot
stop them because they are hungry”. In Maasai language .. ” mililioroyu enkochoke enaa emoti”.
When a slum resident of Soweto ward in Kibera Nairobi was asked to define poverty, he said that
“Poverty is me, look at me! Look at my clothes. I did not have anything this morning and I am not
sure if I will eat anything today. My children are not in school and should they fall ill, I cannot afford
to take them to the hospital.”

11
C. EXTENT AND MAGNITUDE OF POVERTY

58. Three quarters of the poor live in rural areas. The prevalence of overall poverty in 1994
was highest in North Eastern Province (58 per cent of population) followed by Eastern (57 per
cent), and Coast (55 per cent) while the lowest were Nyanza (42 per cent) and Central (32 per
cent). However, by 1997 poverty had increased rapidly and its distribution had changed with
Nyanza (63 per cent) recording the highest level followed by Coast (62 per cent). Nearly all the
other provinces had prevalence levels above 50 per cent except Central, which had the lowest
incidence (31 per cent). The bar chart below shows differentials of absolute poverty in 1994 and
1997 in rural areas. North Eastern was partially covered by the 1997 Welfare Monitoring Survey
due to the insecurity problems and the El-Nino rains that made some areas inaccessible. However,
it should be noted that North Eastern is among the worst-off areas in terms of poverty mainly
because of frequent droughts and problems of accessibility. Efforts will be made to establish the
extent of poverty in the area.

59. Based on the 1997 Welfare Monitoring Survey (WMS) the incidence of rural food
poverty was 51 per cent, while overall poverty reached 53 per cent of the rural population. In
urban areas, food poverty afflicted 38 per cent and overall poverty 49 per cent of the population.
The overall national incidence of poverty stood at 52 per cent. National incidence of absolute
poverty was estimated at 52 per cent based on Welfare Monitoring Survey (WMS III of 1997).
The number of poor increased from 3.7 million in 1972-3 to 11.5 million in 1994 and is now
estimated to have reached some 15 million.
In the urban areas, Kisumu Town recorded the highest prevalence of absolute poverty of 63

C hart 1: Trend of R ural Poverty by R egion

70

60

50

Percent
40
age of

Absolut

e Poor
1994
30

1997

20

10

0
Central Coast Eastern Nyanza Rift Valley W estern N .Eastern

R eg io n

per cent, followed by Nairobi with 50 per cent. Nakuru had a prevalence of 41 per cent while
Mombasa had 38 per cent. Chart 2 below shows the trend of poverty between 1994 and 1997 in the
major urban centres.

12
 Chart 2: Trend of Urban Poverty
70

60

50
% of Absolute Poverty

40

1994
30

1997
20

10

0
Nairobi Mombasa Kisumu Nakuru OtherTowns

Town

60. The majority of Kenya’s urban poor live in peri-urban and slum settlements which are
characterised by inadequate/low quality basic services like inadequate water, limited access to
quality schools and health services and unhygienic living conditions. The urban poor do not have
a regular job and therefore lack regular income and that leads to their inability to afford decent
and adequate housing. Urban dwellers spend about 25 percent of their incomes on rent. Lack of
adequate and regular income leads to poor health, poor education and poor nutrition, which make
them more susceptible to poverty conditions. Lack of access to credit for business or housing
coupled with tenure insecurity, evictions and inappropriate policy and regulatory frameworks
contribute to vulnerability of the urban poor.
61. Table 1 below presents the absolute numbers of poor people by region or town as
estimated from the Welfare Monitoring Survey of 1997. Although Central Province has the
lowest percentage of poor (31%), the actual number of poor (1,126,826) is higher than Coast
Province, which had a higher percentage of poor people (62%) but a smaller number of poor
people (883,667).
Table 1: Overall Poverty in Absolute Numbers
Region/Town The Poor
Households below Individuals below poverty line
poverty line
Central Rural 216,047 1,126,826
Coast Rural 138,691 883,667
Eastern Rural 382,037 2,280,334
Nyanza Rural 507,720 2,678,518
Rift Valley Rural 485,182 2,691,909
Western Rural 315,074 1,739,131
Nairobi 238,328 959,973
Mombasa 53,438 217,402
Kisumu 31,832 140,407
Nakuru 26,378 113,674
Other Towns combined 142,469 562,446
Total 2,537,197 13,394,287

Nairobi had almost half of the total number of poor people among urban areas.

13
D. NATURE AND CHARACTERISTICS

62. The nature and characteristics of poverty go beyond income measures alone given the
multi-faceted nature of poverty. Certain aspects of poverty can well be captured by quantitative
surveys while others can be established by qualitative studies. In Kenya the two approaches have
been used to generate information on the magnitude, extent, nature and characteristics of poverty.
Box 3 shows the characteristics of poverty.

63. Qualitative surveys have shown that poverty manifests itself in the form of hunger,
malnutrition, illiteracy, lack of shelter, and failure to access essential social services such as basic
education, health, water and sanitation. While poverty relates to lack of basic material needs, it
also signifies lack of or deficiency of social, economic, cultural and human rights, which an
individual household or community hold as important or vital for their existence, survival or well-
being.

64. In Kenya the poor tend to be clustered into certain social categories such as:
i. the landless;
ii. people with disabilities;
iii. female headed households;
iv. households headed by people without formal education;
v. pastoralists in drought prone ASAL districts;
vi. unskilled and semi-skilled casual labourers;
vii. AIDS orphans;
viii. street children and families including beggars;
ix. subsistence farmers;
x. urban slum dwellers;
xi. unemployed youth.

Proximate Determinants of Poverty:

Characteristics of the poor derived from the WMS II of 1994 and WMS III of 1997

Proximate determinants of poverty are the factors associated with poverty. They are considered as intermediate determinants or consequences
of poverty. They are also known as characteristics of the poor and in Kenya they have been found to be:

• Demographics: Poor households in Kenya have been found to have large families. Average household sizes for poor families were
6.4 members compared to 4.6 members in non-poor households. Of the poor households, female-headed households depicted a
higher level of poverty.
• Incomes: Wage employment is a major source of income in urban areas while livestock and crop revenue was the main revenue in
rural areas. Subsistence farmers are among the poorest and most vulnerable.
• Expenditure: The poor devote a higher proportion of their income on food (71 per cent in 1994 compared to 59 per cent for the
non-poor).
• Health: Poor health is a quick way to fall into poverty. The time taken to reach a health facility is an important indicator of access to
health facilities. The WMSII found that poor households in rural areas took over 60 minutes to reach the nearest health facility. For
urban, it was 10 to 30 minutes. In addition, access to health services by the poor – availability, affordability and physical accessibility
of drugs and consultations – has been limited due to factors ranging from cost sharing and long distances to health facilities.
• Education: Education is considered as a vehicle for poverty reduction. Poverty has been observed to be highest among people
without any schooling. For example, the cited studies show that there was virtually no poverty among households headed by
university graduates.
• Water and Sanitation: Access to safe water and safe sanitation varies by poverty status and locality. Two thirds of the rural poor
do not have access to safe drinking water and 72.2 per cent of the poor had no access to sanitary facilities.
• Agricultural production: The poor have low yield per acre due to differential access to fertilisers, quality of land, credit, irrigation
and other inputs.

14
65. The poor have larger household sizes while in general rural households are larger than
urban households. Geographically, Coast and Eastern Provinces have the largest mean household
sizes among the poor. Poor women have a higher total fertility rate (rural 7.0 and urban 4.8) than
non-poor women (rural 6.7 and urban 4.1), and in general total fertility rates decline with
education while the use of family planning is higher among the non-poor.

66. Statistics on health status indicate that the prevalence and incidence of sickness are
similar for both the poor and non-poor. However, the response to sickness is markedly different.
An overwhelming majority of the poor cannot afford private health care (76 per cent rural and 81
per cent urban) and rely on public health facilities. However, 20 per cent of the urban poor and 8
per cent of rural poor find even public health charges unaffordable. Furthermore, 58 per cent
urban and 56 per cent of rural poor do not seek public health care because of the unavailability of
drugs. Only 37 per cent of poor mothers gave birth in hospitals compared to 58 per cent of the
non-poor mothers.

67. Empirical evidence shows that 13 per cent of the urban poor have never attended school
at all while the comparative rural figure is 29 per cent. Of the poor, only 12 per cent of those in
rural areas have reached secondary education while for the urban poor the figure rises to 28 per
cent. Dropout rates have risen, as have disparities in access, due to geographic location, gender
and income. The main reason for not attending school is the high cost of education. Children are
also required to help at home, while for girls socio-cultural factors and early marriage are
significant factors.

68. Irrespective of poverty, close to 50 per cent of households in Kenya do not have access to
safe drinking water although the proportion is higher for the poor (56.7 per cent compared to 47
per cent). In urban areas, large populations living in informal settlements within the towns and
cities have no access to safe water. There are large disparities between rural and urban poor in
terms of access to safe water. In rural areas
65. 6 per cent while 19.4 per cent in urban areas have no access to safe water. Regarding
sanitation, about 41.7 per cent of poor households and 27.8 per cent of non-poor households do
not have access to safe sanitation.

69. Certain occupations, such as subsistence farming (46 per cent poor) and pastoralism (60
per cent poor), have a higher than average incidence of poverty. Subsistence farmer’s account for
over 50 per cent of the total poor in Kenya. While the poor cultivate on average more land and
have more livestock than the non-poor, the non-poor earn more than two and one half times the
income from cash crops and more than one and one half times the income from livestock sales.
This pattern can be partly attributed to differences in the fertility of land and the affordability of
inputs to improve productivity. For livestock, cultural factors and the lack of high-grade stock
and poor access to markets could account for low sales among the poor.

70. As a result of poverty the poor engage in activities such as bad farming practices, burning
of trees to make charcoal and poor sewerage disposal. These activities have negatively affected
the environment and reduced the land potential especially in arid and semi-arid areas, making the
struggle for survival harder and leading to overexploitation of land and water resources. Rural
women who mainly depend on land and other natural resources become more vulnerable to
poverty due to environmental degradation. Water sources get depleted, fuel wood exhausted and
more time has to be spent to

15
Fetch these from far distances. Agricultural output dwindles and food insecurity results causing
food poverty and malnutrition.

71. Women are more vulnerable to poverty than men. For instance, 69 per cent of the active
female population work as subsistence farmers compared to 43 per cent of men. Given that
subsistence farmers are among the very poor, this relative dependence of women upon
subsistence farming explains the extreme vulnerability of women. These problems are most
severe in arid and semi-arid areas where women spend a great portion of their time searching for
water and fuel. In many rural areas, the use of intermediate means of transport for domestic
purposes is limited and this makes the effort physically demanding – for example, women carry
heavy loads such as 20 kgs for distances of over 2kms per day. The (seasonally-varying)
implications of these energy expenditures by rural women is enormous – rural life is essentially
labour intensive. Rural people have only a limited daily resource of human energy to devote to
physical work given that their diet is often nutritionally poor. The release of women’s productive
potential is pivotal to breaking the cycle of poverty so that they can share fully in the benefits of
development and in the products of their own labour. In the urban areas, the proportion of poor
female-headed households is higher than male-headed households. Both rural and urban women
are severely affected by poverty. However, poverty is still pre-dominant in the rural areas for both
men and women, implying that poverty interventions need to be intensified and targeted to rural
areas.

72. Within the household, men control women’s labour through marriage, with implications
for women’s labour inputs. In subsistence or small-scale commercial farming, women contribute
higher labour inputs than husbands or children. Women perform over 50 percent of all
agricultural activities and all domestic tasks, but men control decision making on household
expenditures and this constrains women’s ability to make strategic investment choices.

73. Inequitable access to the means of production (land and capital), the distribution of
wealth, reduced access to economic goods and services and remunerative employment are all
causes of poverty. Poverty adversely affects participation in social and political processes and
denies life choices while the poor are particularly vulnerable to natural disasters. Disparities in
access to income, resources and influence over decisions among poor women affect their access
to basic social services. Low-income households find it increasingly difficult to keep girls in
school and they are asked to drop out so that their brothers can continue with education. This
creates a gender disparity in earnings. In terms of income distribution, Kenya ranks as highly
inequitable. Estimates indicate that a high proportion of wealth is concentrated in a very small
proportion of the total population. This income concentration is the highest amongst the 22
poorest countries and is exceeded only by Guatemala (per capita income US$1,340), South Africa
(US$3,160) and Brazil (US$3,640). The indicators demonstrate the depth and breadth of poverty
in Kenya today and the magnitude of the challenge.

E. CAUSES OF POVERTY

74. Different communities had different perceptions of the causes of poverty. The following
were identified invariably by all communities as the main causes of poverty:-

75. Low agricultural productivity and poor marketing was cited by many communities as
the major cause of poverty. This was attributed to traditional farming methods, low soil fertility,
unpredictable weather conditions (drought and floods), poor

16
And inadequate extension services, high cost of inputs, low quality of seeds and lack of credit
facilities. This has led to food shortages, underemployment and low incomes from cash crops, and
poor nutritional status, which further reduces labour productivity and increases poverty.
Mismanagement and collapse of agricultural institutions such as Agricultural Finance
Corporation, irrigation schemes, Agricultural Development Corporations, National Cereals and
Produce Board and Kenya Creameries Co-operative have contributed to poor marketing and low
incomes. Many examples of agro-industries that have collapsed due to inefficiencies and
mismanagement include Ramisi Sugar Factory, Cashew Nut Processing, Bixa Processing, cotton
and sisal factories, coffee and rice factories and Kenya Meat Commission. This has acted as a
disincentive to farmers and has further impoverished many households.

76. Livestock production is also a major source of livelihood for many communities. Low
productivity in this sector has contributed to poverty in many communities. Livestock production
is constrained by lack of water and pasture, animal diseases and lack of information on
marketing. Poor livestock health and high mortality has led to decline in number of animals and
their products thus impacting negatively on the well-being of the people. Lack of markets for
livestock and livestock products due to failure of the Kenya Meat Commission and other similar
institutions has contributed to exploitation of farmers by middlemen during times of drought
when farmers have to sell their livestock and livestock products at throw away prices.

Voices of the Poor on the causes and effects of poverty

In places like Kitui District, communities reported that market centres have lost business and in fact many are just
ghost towns. Lack of market centres has left subsistence farmers at the mercy of middlemen who have exploited
them during harvest and famine/drought times. In Kajiado District, during drought times, people were quoted
saying that “we sold cows for KShs.800/= because the buyer was just buying the skin, I wish we could reverse the
times in order to sell our stock before they are wiped out”.

77. Insecurity was identified by some communities as a principal cause of their poverty. The
causes of insecurity were said to be numerous and complex and include banditry, hijacking,
raiding and stock theft, robbery and looting, physical injury and mutilation, rape and murder. The
immediate consequence is loss and destruction of material property, such as shelter, clothing and
livestock. The loss of livestock, for example, means losing both food source and capital.
Insecurity is a disincentive to the operation of small-scale businesses. Many households have
been rendered poor as a result of insecurity countrywide.

78. Unemployment and low wages was singled out by communities both in urban and rural
areas as a cause of poverty. Communities explained that although their children had completed
schooling, many had failed to secure meaningful employment due to lack of opportunities and
skills for gainful employment and lack of crucial resources for production such as electricity.
Lack of credit due to the inability to obtain collateral was mentioned as a hindrance to self-
employment. In the case of women, access to credit is conditional upon their husbands’ consent.
Moreover women tend not to own land or other tangible forms of security to secure a loan.
Corruption and nepotism have worsened the situation as poor households are often unable to pay
the bribes demanded by potential employers. Lack of employment implies lack of income
necessary for meeting the basic needs such as food, shelter, clothing, education and medical
services. Recent reforms in the country like liberalization of the economy,

17
Private and public sector reforms particularly retrenchment have worsened the problem of
unemployment. Liberalisation of the economy brought about increased market competition. This
coupled with poor management has led to collapse of sugar factories, cotton ginneries, coffee and
sisal factories, and livestock processing industries among others.

79. Bad governance is another cause of poverty cited by communities. This manifests itself
in lack of transparency and accountability in management of the resources and funds meant to
benefit communities. Communities singled out mismanagement of bursary and harambee funds,
mismanagement of co-operatives, relief food distribution, funds for women, youth and the
disabled. This has denied households and communities crucial resources and services that would
improve their well-being. This has tainted self-help programmes and increased poverty. Many
households also complained of harassment by local administration.

80. Land issues: Landlessness was identified by many communities as a major underlying
cause of poverty. In rural areas many communities depend on land for production. However, the
majority have been rendered landless or squatters. The causes of landlessness vary from
community to community. While in some communities this is a result of high population growth,
in others it is due to poor land tenure systems such as communal land ownership. For example, in
North Eastern Province, farmers and pastoralists clashed over grazing and watering points,
thereby causing poor utilization of the land resources. In the coastal region in particular, many
households reported having no land title deeds. Lack of land increases women’s vulnerability to
low incomes and poverty. Ownership and access to land in rural areas is a critical factor
influenced by the interplay of customary and civil law. Although women can legally inherit land,
African customs essentially support a patrilineal mode of inheritance. If a woman is divorced or
separated, most assets, which were initially jointly owned, revert to the husband’s possession. In
addition, many local cultures do not guarantee a wife’s right to inherit her husband’s property
upon his death. Studies in Kenya indicated that
10 Percent of women slum dwellers left their rural homes because their marriages broke down, 8
percent because they were widowed and 8 percent because of the pressures of single motherhood.
Related to landlessness is the fragmentation of land into small uneconomical units in parts of the
country. This is predominant in high and medium potential areas where there is high population
growth.

81. Inadequate roads: Many communities complained of the poor road network. They
lamented that they generally lacked roads and the existing few were in pathetic conditions and
impassable. In other areas, bridges were not available while others were on the verge of
collapsing. This makes access to markets, hospitals and schools impossible/very difficult.
Farmers are therefore not able to market their products and end up being exploited by middlemen.

82. The Cost of Social Services: Cost sharing in health facilities were said to have “lost
meaning”, as the situation in most public health facilities has become worse as reflected by lack
of drugs, collapse of Maternal and Child Health (MCH) services, absence of health personnel,
increased cost of drugs and general insensitivity/unfriendliness of staff, coupled with corruption.

18
 Voices of the Poor – Lack of access to health facilities

In Garissa District, “a message had been sent from Hulugho division that Makoo Adan’s relative had a problem in
delivering. The woman had been in labour for three days and there was no transport to take her to the nearest health
facility that had the capacity to do a caesarian section. A Ministry of health vehicle was sent from Masalani (Ijara district
headquarters) at 8.00pm and arrived back at 4.00am covering 120 kilometers of very rough road. She had to be taken
further to Hola district hospital in Tana River another 80 kilometers as the health facility in Masalani could not cope with
the situation. It is unlikely that the child whose head was already out would survive the ordeal.”

83. The cost of education especially in primary schools is a huge burden on many
households. The many school requirements such as several textbooks for every subject, school
uniform, school development fund, additional hiring of teachers by Parent/Teacher Associations
and other frequent and unplanned levies have all acted to deplete the meagre household incomes.
For many parents who cannot afford the high cost of education, their children drop out of school
and work to supplement households’ budgets. The situation is worse for the girl child who
becomes the first victim to drop out of school due to the boy child preference in a situation of
reduced resources. All these factors limit opportunities for employment and involvement in
income generating activities by women, thus increasing their poverty.

84. Communities cited HIV/AIDS as a recent development problem causing poverty.

Prostitution, especially in urban areas, wife inheritance in some communities, use of
communal/traditional circumcision tools, lack of proper discussion of the disease at an early stage
were given as some of the major causes of the disease. The disease has
Aggravated

19
The situation is worsened by deteriorating economic conditions that make it difficult for women
to access health and social services. Young women are particularly vulnerable to HIV/AIDS as
they often lack the power to successfully negotiate “safe sex”. Women also bear the main burden
of caring for the ill.

85. Gender Imbalance was cited as a key factor in propagating poverty. Lack of ownership and
control over productive assets such as land by women was given as a factor contributing to poverty in
agriculture. In some cases, women cannot make strategic decisions like selection of the part of the
land to cultivate even when the man is away. In many households property is normally registered in
the name(s) of male(s). Traditions in many societies do not give women the right to own property or
to have property registered in their names. Related to this is lack of access to credit facilities by
women due to lack of collateral. This makes female-headed households (divorcees/widows) more
vulnerable because they are single breadwinners. The analysis carried out during the participatory
poverty assessment indicate that men dominate the access and control of household resources/assets
and decision making patterns while women control only minor resources and assets such as chickens,
furniture and utensils.

86. Many communities also highlighted disability as cause of poverty. People with
Disabilities (PWDs) were reported to be socially marginalized, neglected and intimidated in many
parts of the country. PWDs are poorly represented in many decision-making bodies/institutions
hence their interests are not catered for. PWDs have been denied access to public utilities, good
healthcare, basic education and vital information leading to lack of employment opportunities
resulting from lack of relevant skills and knowledge. These factors have further led to their
inability to fend for themselves and have made them dependent on other members of their
households. This makes other family members drive their valuable time from gainful economic
activities. At the household level, their rights to inherit property are either abused or neglected.
These factors combined cause poverty to both PWDs and their households.

F. POVERTY REDUCTION STRATEGY AND TARGET

87. Kenya’s poverty eradication plan was formulated in line with the goals and commitments
of the international development goals (IDGs), notably to reduce the proportion of people living
in extreme poverty by half by 2015. Kenya’s Poverty Plan sets a framework for institutionalizing
poverty eradication in Kenya with a target of reducing the incidence of poverty to less than 30
percent of the total population by 2015.

88. The magnitude of the poverty problem in Kenya is enormous with more than half of the
population living below the absolute poverty line. The Government has therefore adopted a new
strategy that incorporates wider consultations and broader participation of various stakeholders
including the poor in planning and implementing poverty interventions. The immediate challenge
is to stop the increase in the incidence of absolute poverty and gradually reduce the current level.
The poverty issues and priorities identified by districts and sectors during the consultations are
geared towards promoting economic growth and sustainable development. This would help
improve the quality of life and reduce poverty.

20
 Determinants of Poverty

• National Income: Falling per capita income has led to a rise in poverty. The sectors
where the poor are to be found, notably the agricultural sector, declined drastically and
reduced personal incomes as well as national income.

• Income Distribution: A high level of income and, regional inequality has a

negative relationship on growth and poverty reduction.

• Unemployment: Few jobs have been created in the recession period. In 1999, only 8,700
new jobs were created in the formal sector. Unemployment is a major determinant and
characteristic of poverty.

• Wages and Earnings: Employment in the informal sector expanded by 11.5 per cent
creating 385,000 additional jobs in 1999. However, the wage levels in the informal
sector have been drastically lower than in the formal sector.

• HIV/AIDS: A recent contributory factor to poverty in Kenya has been HIV/AIDS. The
overriding poverty related HIV/AIDS concerns are AIDS orphans, population size and
growth, cost of health care and child mortality.

• Environment and Poverty: Poor people depend on natural resources for their
livelihoods especially on common property resources and they are more likely to live in
marginal areas. This is the case of ASAL regions where a higher proportion of the poor
are found.

• Social Insecurity and Poverty: Poverty means more than inadequate

consumption, education and health. Voices of the poor require to be heard. These
voices manifest themselves in forms of illness, crime and domestic violence,
harvest failure, fluctuations in food prices, insufficient demand for labour and lack
of social security in old age.

• Corruption and Poverty: Corruption increases poverty both directly and

indirectly. It diverts resources to the rich people and weakens Government’s ability
to fight poverty.

• Women and Poverty: Gender is an essential in the eradication of poverty since women
are more vulnerable.

• Governance and Poverty: Developing the capacity for good governance is a

prerequisite for the sustainability of poverty eradication efforts.

• Other factors: Poverty has many facets and therefore causes: Participatory
assessments draw attention to the exclusion, isolation and lack of trust in public
agencies as causes of poverty.

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 CHAPTER 4: MACRO ECONOMIC FRAMEWORK

A. INTRODUCTION

89. The Government is committed to the restoration of economic performance that will lead
to sustainable long-run growth consistent with national development objectives. Two of these
broad objectives are to reduce the current poverty levels by half by the year 2015 and to achieve a
‘Newly Industrialized Country’ (NIC) status by promoting industrialization through an export-led
strategy, by the year 2020. The macroeconomic framework recognizes the critical challenges
currently facing the country: how to revamp growth, raise productivity, encourage private
investment, alleviate unemployment and reduce poverty drastically. Given the nature of these
challenges, the government will implement the necessary economic and socio-political reform
measures within the PRSP cycle and will develop monitor able indicators for effective
implementation.

B. OVERVIEW OF PAST ECONOMIC TRENDS

90. Kenya’s Economic Growth: Over the post-independence era (1964 – 2000), Kenya has
transited from a high growth path in the 1960s (6.6 per cent average annual growth over 1964-72)
to a declining path (5.2 per cent over 1974-79, 4.0 per cent over 1980-89 and 2.4 per cent over
1990-2000). This decline in economic performance has, since 1980, been accompanied by
declining investment levels thus reducing the country’s growth potential. This unsatisfactory
performance was due to stop-go macroeconomic policies, the slow pace of structural reform, and
governance problems. The lack of sustained economic recovery in the 1990s resulted in an
overall decline in per capita income. Economic prospects in the late 1990s have been further
aggravated by net outflows of external funding from the public sector and increased government
consumption (mainly wages and salaries), with the resultant effect that public investment
declined more than overall investment. The general outcome has been that public investments
have been inadequate to address the huge backlog of investment required to enhance the
competitiveness of the private sector.

91. Declining levels of investment: The binding constraint to economic expansion is capital
stock and hence investment levels. Between 1982 and 1992, the total consumption to GDP ratio
was 84.2 per cent and the economy achieved an economic growth rate of 4 per cent. Over 1992 to
1999, the consumption rate rose to 96.6 per cent while the growth rate declined to 2.4 per cent. In
order to effect economic recovery, a reduction in consumption is critical and necessary, so that
the decline in investment can be reversed.

92. Unemployment: the formal sector has largely failed to meet the employment creation
challenges of the country. For example, over 1995-99, formal sector employment growth
averaged 1.8 per cent while the labour force grew by an average of
3.5 per cent. This poor performance was due to increased competition encountered by Kenyan
producer’s high production costs, the contraction of the manufacturing sector and the downsizing
of the public sector. The informal sector bore the burden of absorbing the increased labour force
with employment growth averaging over 10 per cent annually. However, the informal sector has
been hampered by its low productivity leading to low incomes and hence low potential to provide
a viable vehicle for poverty reduction.

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93. Declining productivity and competitiveness: During the 1990s the manufacturing and
agricultural sector registered a declining growth that has resulted in loss of jobs and increased
poverty. Firms in the first phase of industrialization through import substitution could not
compete in the face of liberalization and had to close down. The surviving firms are facing
competitive challenges both regionally and globally and are trying to cope with WTO regulations
coming into force.

94. A weak incentive structure for the private sector: The decline in competitiveness of
Kenyan firms has been brought about by the erosion of the incentive structure and distortions in
the price structures, notably the interest rate and the exchange rate, together with other high costs
of doing business in Kenya such as increasing insecurity, deteriorating infrastructure, dilapidated
public utilities, inefficient parastatal sector, inappropriate regulatory framework and, other market
distortions. On the whole, this has led to depressed investments and consequently, low
employment creation and declining economic growth rates.

95. These outcomes have also been compounded by the periodic fiscal deficits. This has led
to the accumulation of short-term government debt. Combined with declines in the saving rates,
this has translated into very high lending rates in real terms in recent years.

96. The challenge of the fiscal strategy for the PRSP cycle is how to reverse these negative
trends.

C. MACROECONOMIC FRAMEWORK: THE FISCAL STRATEGY

2000/01-2003/04

97. The Fiscal Strategy aims at increasing the level of economic activity (GDP) through
enhancing the role of the private sector as the lead sector in wealth creation. This will be achieved
by reducing the level of government expenditure in order to leave more resources to the private
sector.

98. The 2000/01 – 2003/04 fiscal strategy is built around four key objectives and key
constraints: first, to achieve a sustainable reduction in the level of public expenditure to GDP.
This will enable the private sector to play a larger role in the economy. Second, to achieve a
reduction in the ratio level of domestic debt to GDP by securing financing on external
concessional terms. Third, to change the composition of Government expenditure to be focused
more on efficient public investment and operations and maintenance in the long run. And finally,
to focus on efficient sectors by adopting sectoral allocation criteria that reflect the requirements
of the population and reward efficient sectors.

99. There are two key constraints affecting the framework:

• The level of domestic as well as external resources that can be secured during the MTEF
period. Whereas the country can tap into project related funding, the binding constraint will
be the extent to which programme finance can be availed to assist in domestic debt reduction;
and

• The existing expenditure commitments that will limit the extent to which the real level of
expenditure can be redirected.

30
100. In light of these objectives and constraints, the Fiscal Strategy for 2000/01
– 2003/04 is built around the following objectives:

i. Utilizing available privatization proceeds to reduce the domestic debt. A higher level
of domestic debt reduction will be achieved as the Government adopts a more
aggressive privatization stance.
ii. Attaining a balanced budget before grants and a surplus including grants by 2003/04.
This will require a substantial reduction in the budget deficit from KShs.15, 127
million in 2000/01 to KShs.7, 861 million in 2001/02, further to KShs.6, 622 million
in 2002/03, and finally attaining a surplus in 2003/04. It will also imply a reduction in
the level of Government expenditure from 27.7 per cent of GDP in 2000/01 to 22.1
per cent in 2003/04.
iii. Maximizing foreign concessional financing: over 2001/02 – 2003/04, a total of
KShs.72,288 million is projected for external concessional borrowing compared to
net principal repayments of KShs.57,675 million, while domestic borrowing is
projected at KShs.106,815 million compared to repayments of KShs.118,065 million.
iv. Optimizing the core functions of central government, Universities and State
Corporations by rightsizing employment levels with a view to minimizing the fiscal
impacts of any salary adjustments and allowing for a reduction in the public wage bill
to GDP ratio.

101. Key outcomes expected from the Fiscal Strategy are:

i. Growth: Economic growth is expected to follow a gradual recovery path (using the
base case scenario), rising to 2 per cent in 2001, and then averaging 3.2 per cent over
2002 – 2004. Hence, growth is expected to average 2.9 per cent allowing for a
reversal in the declining per capita income trend of 1997 – 2000.
ii. Government revenues: They are expected to rise from KShs.218,616 million in
2000/01 to KShs.249,430 million in 2003/04, an average nominal growth of 7.0
per cent

iii. Total expenditures: They are expected to grow from KShs.177, 532 million in
1999/2000 to KShs.249, 132 million in 2003/04, an average annual growth of 8.8 per
cent over the period. The figure for 2000/01 includes substantial drought related
expenditure and as such does not constitute a base for comparison. Over 2001/02 –
2003/04, nominal expenditure growth will average 3.1 per cent per annum, implying a
decline in real terms.
iv. Deficit and Financing Strategy: The strategy will focus on eliminating the deficit by
2003/04. Domestic debt is expected to decline from 20.8 per cent of GDP in June
2000 to 14.5 per cent in June2004. Over the same period, external debt will decline
from 51 per cent of GDP to 44 per cent, despite an increase in the overall level of
borrowing.

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D. PRO-POOR GROWTH POLICIES

102. Growth targets for poverty reduction: The macroeconomic framework adopted
by the Government will allow for a pro-poor growth strategy that will lay emphasis on a growth
process that directly addresses poverty and leads to sustainable poverty reduction. For growth to
reduce poverty permanently, and also ensure that the growth process is sustainable, it has to be
accompanied with economic policy measures and public investments that enlarge economic
opportunities for the poor in marginal and vulnerable regions. This recognizes the fact that
growth, poverty reduction and inequality are interdependent. The objective adopted by the
government is to effect poverty reduction through changes in resource distribution. This will be
achieved by enhancing equity and access to economic resources by providing viable incentives to
the poor, small-scale producers, small-holder peasants and traders. This objective reflects the fact
that growth policies without effective resource distribution will have a limited impact on poverty
reduction. Similarly, the growth process will not yield expected results if it is not accompanied
with distributional measures. There are several aspects of this Pro-Poor Growth Strategy that will
be the focus of government policy:

i. Promoting access to markets and market opportunities for the poor. This requires
infrastructure provision, access to credit, employment, etc. This will ensure that
markets work better for the poor;
ii. Improve the overall effectiveness of public resources geared towards poverty
reduction;
iii. Enhance the security of the poor by addressing the critical issues of marginal groups
in marginal areas and protect the vulnerable groups. This is important in dealing with
crisis and shocks;
iv. Emphasize and allocate increased resources targeted on human capital development.
This is an aspect that has to be addressed in the PRSP; and
v. Generate employment, improve productivity and improve conditions in the labour
market.

103. This PRSP attempts to address these issues.

E. MACRO ECONOMIC POLICIES FOR 2001 TO 2004

104. In formulating macroeconomic policies that will break the cycle of short-term
stop-go solutions that have proved unsustainable, it will be necessary to identify those policies
that have short-run implications, medium-term implications and long-term implications and
ensure that they are consistent. An advantage in this framework is that it allows for an effective
monitoring and evaluation process.

(i) Short run measures for revamping economic growth

105. Government will take measures to facilitate realignment of GDP composition to

bias it towards investment. The PRSP strategy is to improve the composition of public
expenditure by increasing the share allocated to investment. The

32
Feasible way in this approach is first to continue with the retrenchment exercise that reduces the
wage bill and increases public investment to support both private investment and human capital
development.
106. Improving the quality of expenditure in line with poverty reduction goals:
Improving the quality of government expenditure has positive impact on economic growth and is
consistent with poverty reduction.

33
107. Reducing domestic debt to a sustainable level: In order to dislodge the
domestic debt overhang in the medium term, the government will initiate practical measures to
reduce domestic debt. Measures will be taken to target pension funds as a source of long-term
investment in long-term government bonds and appropriate marketing mechanisms of long-term
government securities. The other medium term measures that will be taken to reduce the stock of
domestic debt and reinforce the above measures include:

i. A buy-back scheme, that will be effected through the establishment of Domestic Debt
Fund finances from privatization proceeds and external resources.

ii. Conversion of a proportion of domestic debt into long-term stocks of 10 to 20 years

attracting a favorable interest rate. This measure will be supported by pursuit of
appropriate inflation targets that supports the increased monetary base. This measure
will remove fiscal pressure from domestic debt management, remove the distortion on
interest rate and exchange rate and allow a moderate inflation rate in the medium term
that would support growth.

iii. In contrast, the external debt is mostly borrowed on concessional terms with
significant grace periods, low interest rates and maturities as long as 40 years.
Furthermore, Kenya has in recent years been making net repayments out of the
foreign debt (redemptions exceeding new borrowings) to the tune of 1 per cent of
GDP in 1997/98, 1.2 per cent in 1998/99 and 1.9 per cent in 1999/2000. These are
huge outflows, which have led the country to borrow heavily.

108. In light of the above, a sustainable debt policy will focus on: -

i. Maintaining an overall framework of budget surpluses or minimal deficits to ensure

that the debt/GDP ratio declines significantly in the coming years;

ii. Net reduction of domestic debt in the short run with a domestic debt/GDP target of 15
per cent by 2003/04;
iii. Substantially scaling back of reliance on Treasury Bills as a budget-financing
instrument in the medium term so that they can be limited to monetary policy
implementation;
iv. Developing long term financing instruments;

v. Reversing the net out-flows reflected in the external debt repayments in recent years;
and
vi. In the short to medium term, the Government will restrict itself to concessional
external borrowing with a view to reducing overall interest payments and providing a
more stable debt profile.

41
109. The Government will put in place appropriate taxation policies. These will
among others:
i. Target exempting or zero rating essential goods consumed by the poor.

ii. Target reducing import duties on raw materials and capital equipment to encourage
local and inward investment by reducing production costs and thereby enhancing
competitiveness within the COMESA and EAC region;
iii. Provide incentives, including tax holidays for investors locating industries outside the
major cities and towns to increase employment opportunities in the rural areas; and
iv. Provide infrastructure (affordable energy, better roads, etc.) in rural areas to attract
local and foreign investors into these areas.

110. Tariff Harmonization within EAC/COMESA: Kenya has commitments under

COMESA free trade area. There is need to use the region as the building block of its export
oriented industrialization strategy. In this context, the Government will:-

i. Target reducing maximum current rate of 40 per cent to 25 per cent by year 2004 to
be in line with the arrangements/agreements with EAC/COMESA;
ii. Rationalize the tariff structure to remove distortions and align them as closely as
possible with those of the trading partners within the region. This will reduce the urge
by industrialists to relocate to other countries with better tax regimes; and
iii. Translate into monetary terms and make budgetary provision for estimates of duty
and VAT exemptions to ministries and Government institutions.

111. Institutional Reforms for monetary policy: The transmission mechanism for
monetary policy will be enhanced. The transmission mechanism of monetary policy works
through the interest rate (price effect) and through the balance sheet (balance sheet effects) of
financial institutions. Institutional reforms will be required so that the interest rate reflects the
liquidity situation in the economy and borrowers and lenders react to the level of the interest rate
rather than the level of domestic debt sold in the market.

(ii) Medium term solutions for revamping economic growth

112. In the medium term, allocation of resources should target sectors and sub-sectors
that can accelerate economic growth and have direct positive implications on poverty alleviation.
The government will focus on sectors that can easily propel growth, particularly the export sector.
Structural reforms and improvement of the regulatory environment in the agricultural sector
should be hastened to facilitate recovery of economic growth. Agriculture and tourism are the
most important sectors due to their linkages within the economy.

42
113. In order to reverse the declining competitiveness, emphasis will be put on
reforming the incentive structure, especially those incentives that remove distortions in basic
prices. Setting prices right, like interest rates and the exchange rate, is an important signal which
will encourage private sector investment. One important aspect will be to use the tax policy as an
incentive to improve competitiveness. Reforming institutions and enhancing the regulatory
environment is crucial to protecting the incentive structure. The private sector will then respond.
Growth and investment will be sustainable in the long run if the incentive structure is not eroded.
Public investment is required to reduce transaction costs associated with perceived country risk
and to provide the strong complementarity needed to enhance the profitability of private
investment.

114. Ensuring clear signals for domestic and private investments: Necessary measures
will be taken to reduce volatility of basic prices and policies that define the incentives and returns
for investors. Investment incentives and rational tax system will be put in place to accelerate
investment and reinforce improvements in macroeconomic environment, governance,
infrastructure and security.

(iii) Long-term policies necessary for sustainable economic growth

115. Recent economic experience has been dominated by low levels of growth, a debt
overhang problem caused by the huge domestic debt and falling productivity and competitiveness
in the manufacturing sector. In reversing this trend, a viable macroeconomic policy environment
will be put in place to address, manage, and effectively cope with uncertainty, instability, external
shocks, improved human capital and institutional development issues.

116. Recognizing the path of main variables, the Government policy will focus public
expenditure and long-term public investments to areas and activities complementary to private
sector investment, reduce risks associated with policy reversals, promote regional co-operation,
and carry through the public sector reforms to enhance public service delivery and cost
effectiveness.

117. Reforming the public finance structure is a long-term strategy. This will ensure
macroeconomic stability, equitable economic growth, effective and efficient systems of
government and governance. The government will put in place a fiscal system that achieves the
objectives of improved resource allocation, and efficient and fair revenue generation, in support
of poverty reduction. In doing this, it is important that cognizance is taken of significant
economic, demographic, institutional and technological changes that are occurring throughout the
world. In the long run the macroeconomic strategy will address these issues and adapt to these
changes to ensure that Kenya becomes an active player in the global economy.

43
 CHAPTER 5: KEY NATIONAL ISSUES AND CHALLENGES

Introduction

118. From the National Consultative processes and Participatory Poverty Assessment
studies, certain issues emerged as major national challenges that need to be tackled as a matter of
urgency in order to reduce the incidence of poverty across the board. These include governance,
HIV/AIDS, pastoralism, gender concerns, youth issues, financial services, support to persons
with disability and media concerns.

(i) Governance

119. An effective and socially responsible government is a critical factor in the

attainment of sustained economic growth and poverty reduction. During the PRSP consultative
process at the district level, communities in nearly all the regions identified poor governance as a
key contributor to the high incidence of poverty in the country.

120. Poor people cited lack of transparency and social accountability, corruption and
highhandedness of public officers especially within the local administration as common key
characteristics of bad governance. Existing structures of governance do not provide local
communities with meaningful opportunities to participate actively in national decision making
processes, which touch on their social, political, and economic affairs. The poor participation of
women and the youth in local decision-making processes especially is indicative of the lack of an
enabling public and social policy framework. It is expected that the ongoing review of the Local
Government Act and the proposed constitutional review process and anticipated land reforms
would provide Kenyans with the most effective mechanism to redress the existing gaps and
weaknesses in the country’s social and public policy framework.

121. Rigid and cumbersome laws and regulations are stated as major obstacles to the
effective participation of the small-scale traders and enterprises in the liberalized market
economy. Existing commercial laws are biased against the small-scale trader and entrepreneurs
especially the Kiosk owner in urban areas who is not accorded formal business and property
rights. Harassment by law enforcement agents and frequent demands for payments for numerous
trade and business licenses are seen as major stumbling blocks to the growth and vibrancy of the
small-scale enterprise sector. Existing commercial and trade laws and licensing regimes are
insensitive to the needs of the small-scale business sector; even the few that are pro small
enterprises are hardly implemented.

122. During the consultative process, communities and the poor cited lack of access to
socially responsive and affordable legal and judicial services as critical issues that need to be
addressed by the Government in the fight against poverty. It is the poor who suffer most from the
effects of weak, unaccountable and insensitive legal and judicial systems. At the same time, lack
of capacity and equipment in the legal and judicial system leads to delays in the administration of
justice, a factor which affects the poorer sections of the economy most. Residents of remote rural
regions of the country such as the pastoral arid zones, parts of Nyanza province (e.g. Kuria
District) and the coastal region (Tana River, Kwale and Lamu districts) have to cover long
distances in order to seek access to proper legal and judicial services. Consequently, crime and
cases of abuse of poor people’s rights have soared, while the need for a just and fair

44
Legal retribution has become more critical than ever. Lack of appropriate infrastructure especially
roads makes certain areas inaccessible thereby seriously hindering the effectiveness of local and
provincial administration.

(ii) HIV/AIDS

123. HIV/AIDS presents the greatest challenge to Kenya’s economy today and in the
future. The scourge threatens to wipe out the most productive segment of the country’s population.
Available data from NACC reveal that most of those affected fall within the 15-49-age bracket, which
covers mainly the youthful and productively active groups of the society. The nature and extent of the
problem is yet to be fully understood and appreciated by the public. However, recorded information
shows that currently about
700 Kenyans die of AIDS related ailments daily, or approximately a quarter of a million
annually. It is also estimated that up to 14 per cent of the country’s population is HIV positive,
which translates to approximately 4.2 million persons or one in every 7 Kenyans being infected.

124. HIV/AIDS has inevitably put families, communities and the Government under
immense pressure to provide care and treatment to those affected. As a result, the level of
sacrifice of financial and material resources as well as the resources it consumes from families
and communities is enormous. Evidence shows that women and girls shoulder most of the care
burden. In certain instances, women have to forego their economic engagements while girls may
be forced to miss school attendance to help care for the sick.

125. An in-depth poverty assessment carried out in Nyamira District during the PRSP
consultations indicated that poverty has made it difficult for communities to take care of
HIV/AIDS orphans as the family members are even forced to sell their land or cattle (if any) to
meet some of the medical expenses. Families that were initially seen to be well off are left in very
poor conditions, while those that are poor have become even poorer.

126. So far no economic impact analysis to ascertain the real cost to the economy has
been conducted. However, empirical evidence from Nyanza Province indicates that the region
spends over 30 million shillings per month on funeral expenses due to HIV/AIDS related deaths.
The multiplier effects resulting from time lost in care, absenteeism from work, loss of capacity in
agriculture and human capital, pressure on health facilities, etc. is equally enormous.

127. The District consultative fora cited outdated and retrogressive cultural practices
(e.g. wife inheritance, witchcraft and negative attitudes) Compounded by ineffective outreach
programmes and poor campaign strategies as the main constraints to effective control of the
pandemic. Increased morbidity and mortality especially of childbearing mothers has strained
medical facilities, which even without the pandemic, had been inadequate. There is significant
loss of both skilled and unskilled labour among the prime ages of 15-49, which has been partly
responsible for increasing child labour. Demand for goods and services have declined limiting
consumption, which directly affects capacity of Government to raise revenue from VAT.

128. The rising number of orphans due to the scourge has increased the dependency
ratio and street children in urban centers. On the other hand, discrimination against people living
with HIV/AIDS at work places, household levels and in the society

45
In general continues unabated despite the high prevalence of the scourge. Proper public education
to clear misconceptions about HIV/AIDS and the creation of a policy framework to protect those
living with HIV/AIDS would go a long way in reducing the pervasive discrimination of victims.

(iii) Pastoral Communities

129. Nomadic and semi-nomadic pastoral and agro-pastoral communities occupy two-
thirds of the country’s landmass. This area comprises a large part of the arid and semi-arid part of
the Rift Valley, Eastern, North Eastern and Coastal Provinces.

130. These regions have the highest incidences of poverty and the least access to basic
social services. The regions, at the same time, suffer a wide range of natural calamities and socio-
economic inequities namely: intermittent droughts; insecurity due to banditry and cattle rustling;
lack of basic communication infrastructure; lack of access to basic social welfare facilities; huge
gender disparities; lack of market infrastructure for livestock; high unemployment rates among
the youth; and poor integration into the national social and political economies.

131. However, nomadic pastoralism has proven the most prudent production system in
the ecologically fragile ASAL rangelands. The value of the livestock resource base in the ASAL
regions despite the low level of infrastructure development in the regions is estimated at about
Ksh.70 billion. In 1988 for example, the export of hides and skins ranked fourth as a foreign
exchange earner for the national economy.

132. Drought and insecurity are arguably the most critical challenges facing the
pastoral regions of Kenya. In the year 2000/2001, the government proposes to spend Ksh.4.8
billion on relief food to deal with the effects of drought related emergencies. Investment in long-
term and sustainable drought management and mitigation programmes could save the nation
considerable resources that could be channeled into human resource development programmes in
the region. Huge expenditures on security measures in the pastoral regions often utilize resources
earmarked for socio-economic development. This could be prevented by directing investment to
long-term participatory conflict management and resolution programmes in the pastoral
communities. The effects of drought are further compounded by the weakening of indigenous
resource management mechanisms.

(iv) Gender

133. Gender is a crosscutting issue. Gender concerns go beyond simple physical and/or
biological differences between women and men, boys and girls and embrace the power relations
between the sexes as well as the different roles the society assigns to each. The PRSP
consultations underscored the point that a nation that is committed to rapid economic growth and
poverty reduction must engender all its socio-economic and political activities including
investment programmes. While it is important to take cognizance of the socially constructed roles
of women and men (boys and girls), it should be reckoned that responsive gender planning and
implementation enhances efficiency in utilization of resources for sustainable development.

134. However, employment statistics show that only 25 per cent of women are engaged
in formal employment compared to some 40% of men. Most of the rest work in

46
the informal sector where there is lack of social security and access to credit facilities. The
regulatory framework in this sector also does not support women entrepreneurship. Women lack
clearly designated safe spaces for petty trade, which is always a source of tension between them
and local authorities.

135. During the PRSP consultations at the District, Thematic and Sector levels, gender
disparities were pronounced as a major concern that needs to be addressed as a precondition for
poverty reduction. Some of the areas where women and girls were found to be relatively
disadvantaged were access to education, gender biased laws/practices, unequal access to credit
and the limited role played by women in decision making at all levels of society.

136. Since women form 51 percent of Kenya’s population, their active participation in
national development policy formulation and implementation is critical. The Government,
therefore, recognises that gender insensitive programming will be wasteful and that women must
be integrated in the decision making process at all levels. Evidence from PRSP consultations
show that women need water nearer their homes; want equal opportunities in education; and need
enhanced social services to help them care for their children.

(v) Youth Issues

137. The 1999 census shows that the youth aged 15-25 years represent about
22 Percent of the national population. Since 1990, the government has embraced the policy of
reforms, which involves cutting down the size of the public service. This has affected the
absorption of the youth in the few jobs created in the public service. The private sector has also
been unable to create employment due to dismal economic performance. Consequently, majority
of the youth in the job market have not been able to find jobs in order to support themselves.

138. Other issues cited include high school dropout rates where girls are the major
victims, limited access to modern technology, and lack of assets like land and credit facilities.
Communities also expressed serious concerns about youth being idle. Idle youth, they said, pose
a major challenge as some engage in street crimes, others have resorted to begging while others
are used as conduits for drug-trafficking. HIV/AIDS is a major menace to the youth, as the rate of
infection is highest amongst this group.

(vi) Financial Services

139. Lack of financial services for the small businesses and smallholder farmers was
identified as a major constraint to growth and productivity. High interest rates charged by
commercial lenders have made borrowing money in Kenya very expensive and hence extremely
limited. Financial services must be affordable and accessible to small entrepreneurs who form the
majority of Kenyans to enable them to invest to generate more money and create a solid savings
base for further investment. This situation has trapped most Kenyans in the vicious cycle of
poverty.

140. Potential buyers of residential houses are also discouraged by prohibitive

mortgage requirements of most of the housing finance providers. There are limited
entrepreneurial skills in the industry and lack of enterprise culture has led to slow enterprise
growth.

47
141. The consultations cited poor physical infrastructure and information
communication as major impediments to this sector. The growth of financial services, especially
in rural areas, is constrained by poor infrastructure, which makes it difficult to access information
and provide these services. This situation increases transaction costs, making these services
expensive and unaffordable.

142. The legal and policy frameworks for financial services are also less supportive to
small borrowers since they invoke commercial banking requirements. Agricultural finance
services e.g. AFC, KFA etc. have collapsed, leaving smallholder farmers with few appropriate
facilities for credit. As the majority of Kenyans belong to this category, investments in production
have dwindled with time, which in turn has affected the economy negatively.

(vii) Disability

143. Disability in Kenya poses a major challenge to the economy and is one of the key
contributors to poverty. People with disability (PWDs) form 10% of the population which is a
significant proportion of the population and yet they remain hidden. Most statistics do not
identify people with disability hence planning has largely missed them. In terms of national
budget allocation, institutions dealing with PWDs have insufficient budgetary allocation that
makes them unable to deliver goods and services to disabled people effectively.

144. During the PRSP consultations persons with disabilities were widely consulted
which gave this group a chance for the first time. Discrimination against PWDs was found to be
widespread in all sectors. Educational institutions rarely thought of PWDs when planning their
curricula. Social and recreational centres largely serve able-bodied persons. Buildings are often
constructed without considering the plight of PWDs and many services like telephone, transport,
etc, are not designed to accommodate PWDs. PWDs feel downtrodden and are usually hidden by
even their own families as they are considered a liability and bad omen in some cultures.
Amongst the Somali community, camels and other animals are considered more valuable than
PWDs.

145. Persons with disabilities have limited access to education and are typically always
given the last opportunity even by their own families. In terms of employment PWDs are usually
the last to be considered. Their employment also is usually limited to menial non-executive
positions. PWDs are denied economic empowerment and are relegated to minor chores such as
telephone operation, cobbling, tailoring, etc. As a result, PWDs contribute significantly to the
poorest of the poor. In order to fight the existing prejudice against PWDs universal design of
projects, especially in the service industry (police, medical, education, architecture, banking and
other professions) should be adhered to. This design encompasses the special needs of disabled
persons. This will bring the PWDs into the mainstream of national development where their
contribution will be registered. It should be noted that PWDs are not just consumers of goods and
services, but are also producers. Currently, there is a consensus amongst stakeholders that
disability is not inability hence PWDs must be enabled to claim their rightful share of the national
resources.

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(viii) Media Issues

146. Media is a cross-cutting sector, which supports all other sectors. The primary goal
of the media is to keep people informed of what is happening within the country and the rest of
the world. Media has played an important role in all aspects of national development. Indeed the
Turkana famine of 1999/2000 was brought to the fore by the media where support was mobilized
from all Kenyans. An effective, objective and vibrant media can provide an opportunity for poor
people to raise their voices and articulate their needs to policy makers in ways that provoke
constructive action.

147. Infrastructure development in the IT sector is also still undeveloped, hence

potential investors find it too expensive to commit their resources. Remote districts especially in
the ASAL areas are the ones most affected, since information arrives when it is already out of
date, making them continue to lag behind the rest of the country.

148. There is no defined policy on information and technology management. This has
left decisions in this sector to be handled in an ad hoc manner. Licensing of media houses is
extremely complicated to the extent that radio and television coverage is limited and only KBC
has a national coverage. As many Kenyans (80%) live in rural areas, they are disadvantaged since
they have to rely on only one station for most of their information. Such a monopoly may not
always promote diversity and objectivity hence limits options that could have been enjoyed by
the people. These tedious processes have also discouraged investment in this sector.

149. In terms of professional and IT development, there are limited opportunities for
higher training in the country. This means that such training has to be procured abroad where
costs are prohibitive. There is a need for a strategy that will facilitate the full scale development
of a nascent IT industry in the country with particular response to the promotion of accelerated
use of Internet.

150. For Government to become effective in its fight against poverty, media must be
fully liberalized to inform Kenyans and external investors of opportunities for investment and
available options that exist. There is overwhelming evidence from countries in South and South
East Asia and Latin America which shows that, where media is fully involved in the mainstream,
national development accountability and transparency have been enhanced and such economies
have registered higher growth rates. The government, therefore, can no longer ignore the role of
media in national development.

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